Denver Health Medical Center will pay $6.3 million to the federal and state governments to settle a whistle-blower’s allegations that the hospital charged Medicare and Medicaid for “inpatient” stays when people didn’t receive that level of care.

Former internal auditor JoAnne Curren claimed in a federal fraud lawsuit that the city hospital overbilled for people as “inpatients” when they really were receiving lower-cost care under “observation,” or as “outpatients.”

Curren’s suit said that she was fired for writing internal reports about the billing practices and that Denver Health managers continued the alleged fraud even after she detailed the issue and objected.

The state attorney general’s office, which helped in the investigation, said the settlement is the largest with a metro-area hospital in at least eight years.

Denver Health said Thursday that it changed the practice as soon as it found out and that “it is important to remember that hospital billing is an extraordinarily complex endeavor. The Observation/Short Stay guidance is controversial and subject to questions of medical judgment,” the hospital said in a statement.

Denver Health doesn’t admit to fraud in the settlement, under which the whistle-blower case was dismissed. But the government had previously agreed to join the whistle-blower’s case and launch its own investigation, a step it does not usually take unless attorneys see substance in the allegations.

Under the federal whistleblower act that makes such health-fraud cases possible, Curren benefits from the settlement. She will receive just under $818,000. Denver Health will reimburse state Medicaid for $1.1 million and federal Medicare and Medicaid for $5.2 million.

Curren’s suit said the disputed billing took place “at least” from 2006 through July 2009.

Overbilling in public health “results in fewer resources for those who need them most,” Colorado Attorney General John Suthers said.

“This case serves as a reminder that hospitals must scrutinize their billing practices to prevent overbilling,” said U.S. Attorney John Walsh, in announcing the settlement.

Curren is a former examiner for the state Division of Insurance who was hired by Denver Health after officials there liked her work reviewing a new Medicare product.

Curren said she was asked by her managers to do an internal review of inpatient versus outpatient and observation admissions in 2008. That December, her report said Denver Health was misclassifying patients as inpatient when they were really there for short-term observation or help.

Her report angered managers, she claimed, and she was fired in January 2009 “in blatant retaliation for having cast light on their unlawful billing practices and refusal to self-report.”

Denver Health said it could not comment on personnel matters but that it has a strong anti-retaliation policy for workers who raise questions. The hospital also said both it and the government agreed to settle to avoid long litigation.

Denver Health said it was important to note the government didn’t require an “integrity agreement” or take any other punitive action.

Hospital officials said the settlement was not related to Denver Health chief executive Dr. Patricia Gabow’s announcement in November that she would retire later this year.

Michael Booth was a health care & health policy writer at The Denver Post before departing in 2013. He started his journalism career as an assistant foreign editor at The Washington Post before moving with family to Denver and taking a brief stint with the Denver Business Journal. During a 25-year career at The Post, he covered city and state politics, droughts, entertainment and wrote Sunday takeouts, and was part of two Pulitzer Prize-winning teams for breaking news coverage.

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